1. What is labor-management overtime work agreement?

When a company makes its employees work beyond statutory work hours (“statutory overtime work”) or on statutory holidays (“statutory holiday work”), it is necessary to sign a labor-management agreement in advance and submit it to the Labor Standard Office in jurisdiction. Since this matter is set forth in the Article 36 of the Labour Standards Act, it is commonly called the Saburoku Kyotei (36 agreement).

Statutory work hours is eight hours per day and 40 hours per week (44 hours for companies entitled to exceptional measures). Hours worked in excess of this limit is considered overtime work, unless the company adopts an irregular work-hour system.

Companies are required to give their employees take one holiday per week, or four holidays in four weeks in the case of an irregular work-hour system. Work on such holiday is considered as statutory holiday work.　In principle, the ceiling of overtime work is 45 hours per month, 360 hours per year, in accordance with the Labour Minister’s announcement (*).

* Labour Minister’s announcement on overtime work based on an agreement

Standard limits on extended work hours based on an agreement set forth in Article 1 of the Labour Standards Act (Announcement on standard limits)

2. Agreement on overtime work with special conditions

If overtime exceeds 45 hours per month or 360 hours per year, the company is required to submit an “Agreement on Overtime Work with Special Conditions,” which enables the employees work overtime up to the agreed limit. Even with this agreement, employees cannot work overtime 45-plus hours more than six times a year. It is also required to state the rate of extra wage for overtime in excess of 45 hours.

* Under the current rules, companies are required to pay at least 50 percent extra wages for monthly overtime exceeding 60 hours, but the rate has been kept at 25 percent for small firms. However, with the enactment of a law concerning workstyle reform, all companies will be required to pay 50 percent extra wages from April 2023.

3. Law amendments taking effect in April 2020

New rules must be reflected in the Agreement to be submitted next year. Following are the new rules concerning work hours.

[Points of the law amendments]

(1) Upper limits of overtime work

Previously, there was no limit on overtime work for companies who have submitted an Agreement with Special Conditions. The new rule has set upper limits on overtime work under an Agreement with Special Conditions. Even if a company and its employees agree on overtime work under temporary, special circumstances (“Agreement with Special Conditions”), overtime work must not exceed the following limits:

• Yearly overtime must be no more than 720 hours.

• Combined overtime and holiday work hours must be less than 100 hours per month.

• Combined overtime and holiday work must be no more than 80 hours on the average of two, three, four, five and six months.

• Employees can work overtime more than 45 hours per month only up to six times in a year.
  

(2) New items have been added to the Agreement with Special Conditions. Labor-management agreement must be reached on the following points.

i) Employees covered by the Agreement

ii) Reasons

iii) Overtime hours exceeding the standard (daily, monthly and yearly overtime hours)

iv) Procedure to make employees work overtime

v) Measures taken to ensure health and well-being of employees who work overtime beyond the standard limits. (To be chosen from below.)